Challenges Faced by Multifinance Regarding the Relaxation Policy
Financial Services Authority (OJK) has released POJK No 11/POJK.03/2020 related to the National Economy Stimulus as a countercyclical policy. POJK is a part of the credit or funding restructuring program formulated by the government to help clients who were affected by COVID-19. OJK declared that many financing companies in Indonesia have reported and are committed to be involved. In this POJK, banking and funding and financial institution can implement the stimulus policy in order to support the economic growth by determining assets’ quality and by restructuring credit and financing for debtors who were affected by COVID-19
COVID-19 pandemic delivered substantial negative outcomes toward Indonesian economy. Almost all sectors are affected. One of the factors that obstruct the economy is the large-scale social distancing (PSBB) program. The reason being, PSBB significantly reduces companies’ performance and consumers’ demand.
One of the economic sectors which faces adversities in this situation is multifinance or financing. Relaxation refers to a delay of instalment payments or financing terms extension, depends on the agreement between debtors and the leasing company. Thus, multifinance companies have to restructure several aspects in order to ensure a proper relaxation implementation.
As for the technicalities, each company would perform assessments toward their clients to determine which client would require a heavy, medium, or light restructuring, as well as those who does not require it. The main challenge is, how to determine which strategy would be the best to deal with bad credits I order to reduce a spike in NPL. First strategy is for the company to select debtors with a higher standard, although a probability of having new debtors in this pandemic is quite low. The second strategy if for the company to perform monitoring and reevaluate the debtor’s data periodically, because through credit restructuring the said debtor’s credit status will be automatically considered as current.
Other than that, the default rate among leasing companies is another challenge in this time of COVID-19 pandemic. Through a good flow of communication between debtors and creditors, the relaxation can be approved and would be effective.
CONFINS is one of AdIns’ trusted core system products which have been used by more than 30 multifinance and financing companies in Indonesia. Currently AdIns is cooperating with multifinance company clients to provide a solution and to assist CONFINS system to that the clients can implement policies set by the government through credit restructuring for the debtors.
All of these are a part of AdIns’ commitment to support the multifinance industry by ensuring that our system will always comply with government regulations so that our core system users would be able to adapt swiftly to the changes.